Guaranteed renewable individual health insurance is an important form of protection for people under 65. I plan to examine the feasibility and expense of premium guarantees in the wake of rising medical prices, by combining techniques from health services research, insurance, and finance. I will show how the exposure to medical inflation differs by the demographics of insured. My goal is to develop investment policies that insurance companies can use to ameliorate the rising costs of medical care and make guaranteed renewable health insurance contracts more affordable and solvent. I will test insurer solvency and premium affordability in a stochastic model of guaranteed renewable individual insurance. I will expand on prior, deterministic, models of guaranteed renew ability by adding random fluctuations in medical inflation, interest rates, and investment returns. Then I will calculate the actuarially fair premiums required to fund future claims. I will forecast the expected paths of inflation, interest, and investment returns and calculate the level of prediction error using standard macroeconomic techniques. I will then combine the fair premiums with the macroeconomic forecasts to determine the probability of shortfall, as well as the conditional expected timing and magnitude of shortfall. I then develop the optimal investment policy for guaranteed renewable insurance. I will examine the correlation between medical inflation, interest, and investment returns, and use asset/ liability modeling techniques to determine the mix of assets that best funds different risk pools. I will then recalculate the shortfall probabilities and conditional expectations of shortfall. I will use a range of data sources in my research. I will derive my inflation data for medical and general inflation from the Bureau of Labor Statistics'Consumer Price Index series. The securities return and interest rate data sets I plan to use are the Fama-French research portfolios, S&P stock return indices, and Moody's bond return indices. I expect that this research will be useful to research scientists, insurance companies, and regulators. I will contribute to the academic literature by extending an important model, guaranteed renewable health insurance, with stochastic error terms. I will also be able to help insurance companies allocate their investments in a way that recognizes the correlation between their liabilities, securities returns, and macroeconomic variables. I will be able to provide similar insight to insurance regulators as they oversee the solvency of health insurance companies. The contributions will help all stakeholders to improve planning for reform in health care financing. My research will determine the impact of medical inflation on the premiums and solvency of guaranteed renewable individual health insurance. I will develop methods that minimize the effect of inflation on premiums, increasing the take-up of insurance. I will develop methods that allow insurers to offer longer term rate guarantees, which will maximize the protection health insurance can provide against long term medical costs.